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Pensioner Poverty

I certainly think we should have some clear policies on how we will reduce poverty. I totally agree with that, but legislation is not the answer. Legislation on child poverty seems to be merely a reaction to the fact that the Government are clearly missing their existing targets. Targets are one thing, but hitting them is entirely different. The Minister for Pensions and the Ageing Society, the hon. Member for Wallasey (Angela Eagle), said only the other day on the Floor of the House that this is""the first Government ever to end the link between poverty and old age."—[Official Report, 7 December 2009; Vol. 502, c. 12.]" I shall demonstrate why that is a ludicrous claim, particularly as well over 2 million pensioners still live in poverty. The fact is that it all depends, as with so many things connected with the Department for Work and Pensions, and the Government, on which statistics are used. Let us be precise. Ministers said at one time that under them pensioners were no more likely than any other part of the population to fall into poverty, but I think the current mantra is that pensioners are less likely than other members of the population to fall into poverty. One might be able to argue that if one set of statistics were used, but using the before-housing-costs income measure the figures are that 23 per cent. of pensioners and 18 per cent. of the population as a whole are in poverty according to the latest figures. So that claim is simply inaccurate, and I hope that it will not be repeated today. Yesterday was a particularly grim day for pensioners, current and future. First, we had the pre-election con of an increase in benefits next year, to be followed by a cut the following year. The Government have put Tory benefit cuts into their own projections in the pre-Budget report, and it has not taken long for most commentators and most pensioners to see through a blatantly cynical manoeuvre. Another issue is the yet further delay that was announced yesterday, rather diffidently and quietly, in implementing personal accounts. I shall return to that in more detail in a moment. The third thing is the dog that did not bark, and the fact that we are still here with no firm commitment on when the Government intend to restore the link with earnings for the basic state pension. That point was touched on by the hon. Member for Rochdale. I have already spoken in some detail about the pre-Budget report, but let me reiterate that the Government are committed to increasing benefits—which are normally uprated by the RPI—by 1.5 per cent. in April 2010. However, to help pay for that, benefits in 2011 will be uprated by 1.5 per cent. less than the RPI, which is a real-terms cut. That is extraordinary. We are now effectively in an election campaign in which the Government predict, using their own projections and figures, that the next Government will cut benefits and pensions in real terms. I return to the issue of personal accounts, which are about trying to establish a solution to a problem that we all agree on—those millions of people, mainly middle and low-income earners, who have no existing pension provision. The Government have been talking about the issue since 1998, and the Turner review worked on the basis that the new system would start in 2010. A few weeks ago, an announcement came out of the blue stating that the implementation period for personal accounts would be extended from 18 months to three years. Many low-paid workers, particularly those who work in smaller firms which are at the end of the queue under the present plan, will not get their full employer contribution, or the full benefits of being auto-enrolled into personal accounts, until 2016. That is bad enough. However, in an interview a couple of days ago, the Minister for Pensions and the Ageing Society said that as far as the Government were concerned, it was "full steam ahead" on personal accounts. From that, I assume that she was wholly unsighted of the fact that the Chancellor was about to announce a further delay in the implementation of personal accounts. As we know, a significant delay was announced yesterday. The delay is not in the commencement—personal accounts will still commence in 2012, but quite what will happen is a bit of a mystery. I suppose that one person might be auto-enrolled into personal accounts by 31 December 2012. Who knows? Something will happen in 2012, but it will be 2017 before employers are required to pay the full rate of contribution. Until then, the rate of contribution will be 1 per cent. All sorts of problems are associated with that. It is bad news for Turner's target audience—those on low or medium incomes—who need to save for their retirement. It means several years at least of a sort of planning blight, during which people will not be making or receiving full contributions, or making any other arrangements for their retirement. It will be a period of contributions and benefits that they will never be able to make up over their working lives. The Association of British Insurers said that the Government admit that""this delay will save £2.4 billion"." The delay has nothing to do with the efficient introduction of personal accounts, or trying to avoid what has been called "a terminal 5 moment" in introducing them. We have always accepted that there should be no big bang in introducing such a measure, and we always accepted a period of around 18 months for its introduction. However, this has nothing to do with that; it is about saving the Treasury £2.4 billion. The ABI goes on to say:""This money will be saved at the expense of getting the low-paid into long-term pension saving which is absolutely vital for the future welfare in retirement of the workers of today. The Government's changes to the timetable will mean that employers joining the scheme in 2012 will be able to pay just 1 per cent. contribution for a full four years with Government backing. This will create a dangerous incentive for employers to join the Government's scheme and level down from the typical private sector Defined Contribution scheme of over 6 per cent. This will lead to a fall in overall savings levels for the employees affected."" We are looking at potential pensioner poverty in the future as a result of this measure. Tom McPhail, from the financial advisers Hargreaves Lansdown, has said:""This move is all about sacrificing the long-term interests of people's retirement plans for the sake of digging themselves"" —that is the Government—""out of a hole the economy has got into."" Our position is clear: this is yet another setback to rebuilding savings and pensions in this country. The Government have already been forced to delay the scheme's implementation, by phasing it in over several years. Now, we find out that the 3 per cent. employer contribution will not be reached until October 2017. Yet again, it is low and middle-income earners who will pay the price for Labour's debt crisis, with the delays taking £2.4 billion out of the pension pot. All that is against a background of existing damage to final salary schemes. Active membership of final salary schemes has halved since 1996, and there have been problems associated with the Pension Protection Fund and the financial assistance scheme, which the hon. Member for Stroud (Mr. Drew) referred to. There have been considerable problems in getting compensation for people in all the schemes that have collapsed since 1997, which at the same time undermines people's confidence in the process of saving for retirement. That is the key to all this; we must make it worth while for people to save for their retirement. If some experts are right, and one in four babies born today will live to see their 100th birthday, a potential king-sized problem of pensioner poverty looms in the future, as we try to pay for many years of retirement, far more than we have at the moment.